Monte dei Paschi, the world's oldest bank, was bailed out by the Italian state

Banca Monte dei Paschi di Siena, founded in 1472, is the oldest surviving bank in the world, and Italy's third-largest. By 2016 it was crippled by years of losses and by a mountain of loans that might never be repaid. It had failed an EU stress test in July, exposed as holding billions of euros of risky loans made to borrowers who could not afford to repay them.

The bank tried to save itself privately. It put together a plan to raise about €5 billion from private investors, but in December 2016 that effort failed — the market would not provide the capital. Monte dei Paschi then revealed that it could run out of funds within months, potentially burning through as much as €15 billion; for 2016 alone it reported a loss of about €4.8 billion, driven by writedowns on its bad loans.

On 23 December 2016 the Italian cabinet approved a state bailout. The government authorised a €20 billion fund to support Italy's banking sector, and Monte dei Paschi said it would request a capital injection from the state to stay afloat. The rescue put at risk thousands of ordinary retail investors, who were estimated to hold some €2 billion of the bank's bonds.

Monte dei Paschi is a case about what happens when bad lending is left on the books for too long. A bank can survive a few bad years, but not a decade of loans that will never come back; once the market refused to fund the hole, the state — and the taxpayers and bondholders behind it — had to backstop the world's oldest bank.